Political violence and terrorism market hardens as risk deteriorates

Rates are going up for political violence and terrorism cover, and more restrictions are being imposed as the geopolitical landscape deteriorates, according to WTW. Richard Scurrell, senior director at Special Contingency Risks, which is part of the broker, said the current geopolitical environment has put a lot of focus on terrorism and political violence in Ukraine and elsewhere. He told Commercial Risk Europe at the Ferma Forum that a lot of the issues seen in the market pre-date the Ukraine invasion, pointing to riots in Chile and Colombia and the significant unrest in South Africa during the last two years. These triggered a lot of local insurers in those territories to pull cover or impose underwriting restrictions, which effectively means policies can no longer be underwritten in the domestic market and are being referred to London. “We are seeing a lot of scrutiny now, particularly on master facilities where delegated authority is given by the underwriters either to the broker on a limited binder or to the lead underwriter. And some of those markets are uncomfortable with the power of the pen being given to someone else, and following markets not necessarily having full awareness of the exposures that they are participating in,” said Scurrell. He noted that political violence is often excluded from a traditional terrorism policy but can always be bought back. “But the additional premiums being charged for that are definitely on the increase, especially if there is exposure in Africa, Latin America or the Middle East,” said Scurrell. He explained that the political violence and terrorism market is growing, and a lot of risk managers are buying the cover for specific territories and locations, rather than on a global basis. He warned that rates are going up and more restrictions are being imposed. "We’ve seen WR Berkley pull out from the market following the Ukraine invasion and a lot of the focus is now on the treaty reinsurance renewals on 1 January. What will the impact be and will we see potentially other markets withdraw, or will we see them reduce their capacity?” he said. Scurrell added that things are certainly not going to get any easier for buyers and while there are still plenty of carriers at the moment, their appetite is adjusting. “Whether we are looking at a smaller number of players or whether we keep the number of players but with reduced line size and capacity from some of those carriers, we wait to see. There is plenty of capacity at the moment but we will see what it looks like next year depending on the treaty reinsurance renewals,” he noted. Scurrell said hardening came late to the political violence and terrorism market. “Much like the accident and health, and the kidnap and ransom market, the terrorism market had a much longer soft cycle and was more protected from the hard market than other sectors like cyber and D&O, but it is now coming through,” he explained. The insurer said the real catalyst for the hardening terror market were losses in Chile, South Africa and Ukraine. Prior to that, the terrorism market had been so soft for so long, and with so few losses, that it was difficult to justify the need for rate changes, or that rates were unsustainable, he said. He concluded that political violence and terrorism is undoubtedly a growing market and is “a sad reflection of the current world and the geopolitical landscape”. “It is not going to get better anytime soon, so any crisis management-related specialist products will have a key role to play in any risk manager’s approach,” he added.

Political violence and terrorism market hardens as risk deteriorates

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